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CB relaxes inward remittance guidelines to facilitate easy passage of forex

27 April 2021 09:06 am - 0     - {{hitsCtrl.values.hits}}

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  • ‘External Commercial Borrowing Account’ to replace ‘Inward Investment Account’
  • Emigrants now allowed investing in Sri Lanka out of funds held in Non-Resident Rupee Accounts and Capital Transaction Rupee Accounts
  • Three new eligible resident investor categories to listed and non-listed entities incorporated in Sri Lanka and sole proprietorships

The Central Bank has introduced a number of revisions to its existing laws governing the country’s foreign exchange dealings to facilitate easy passage of foreign currency, with a view to further ease the cross-border transactions and to provide convenience to stakeholders in doing business. 


The revisions to the Foreign Exchange Act comes at a time when the country’s currency has come under mounting pressure from the external commitments, which have to be met despite the inflows are under severe stress from pandemic-induced disruptions. For instance, tourism trade, which has the potential to generate as much as US $ 4.5 billion annually, has been reeling since last year, due to the flare-ups in the virus. 

 
In context, the annual inflows from the tourism themselves would have been sufficient to meet the entirety of the external liabilities falling due every year through 2025. 


Amongst the major revisions introduced to the Act is the decision to do away with the mandatory requirement to open what is referred to as the ‘Inward Investment Account’ by foreign investors or lenders when granting loans to Sri Lankans, the government or to the state-owned enterprises. 


Instead, the Foreign Exchange Department at the Central Bank has introduced a new account titled ‘External Commercial Borrowing Account’, to facilitate foreign borrowings from overseas by the resident Sri Lankans. 
Meanwhile, a general permission has also been granted to companies registered in Sri Lanka, such as branch offices, liaison offices and project offices to raise moneys from their parent firms in overseas. 


A general permission has also been granted for non-resident investors to invest in shares or debt instruments of companies not incorporated in Sri Lanka and listed on the Colombo Stock Exchange by way of routing funds through accounts maintained in the offshore banking units of the Sri Lankan licensed commercial banks, without having to rout such investments through the Inward Investment Account, effectively cutting off an additional step. 

Further, the department has also introduced a supplementary account titled ‘Emigrant’s Remittable Income Account’ for the purpose of repatriating emigrants’ current income and has permitted emigrants to invest in Sri Lanka out of funds held in Non-Resident Rupee Accounts and Capital Transaction Rupee Accounts.


For those Sri Lankans employed outside Sri Lanka, other than emigrants, a general permission has been granted to open and maintain Sri Lanka rupee accounts for crediting funds generated in Sri Lankan rupees and for local disbursements. 


Meanwhile, a general permission has been granted for Sri Lankan residents who have been a resident outside Sri Lanka and earned/obtained foreign exchange outside Sri Lanka to open, maintain and operate accounts with regulated financial institutions outside Sri Lanka. This same permission is granted for companies incorporated in Sri Lanka, which are eligible to borrow from overseas. 


Further, the department has also introduced three new eligible resident investor categories to listed and non-listed entities incorporated in Sri Lanka and sole proprietorships. 


The Central Bank earlier wooed those who are in possession of unutilised foreign currency obtained as travel allowance into new or existing personal foreign currency accounts, in a bid to draw any and every foreign currency on the hands of the public into the banking system. 


All revisions came into effect from March 22, 2021, after they were gazetted on February 3, although they were made public by the department last week.

 


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Order Gifts and Flowers to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Grocery, Kids Toys, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,Astrology, Courier/Delivery, Medicine Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka

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